In Re: San Juan Fire v. Holders Corp. etc

• Court: Court of Appeals for the First Circuit
• Decided: March 29, 1993
• Docket: 92-2216
• Status: Published

Opinion

USCA1 Opinion

March 29, 1993   UNITED STATES COURT OF APPEALS 
                                FOR THE FIRST CIRCUIT
                              _________________________

          No. 92-2216

                 IN RE:  SAN JUAN DUPONT PLAZA HOTEL FIRE LITIGATION.
                              _________________________

                         HOLDERS CAPITAL CORPORATION, ET AL.,
                             Cross-Claimants, Appellants,

                                          v.

                     CALIFORNIA UNION INSURANCE COMPANY, ET AL.,
                             Cross-Defendants, Appellees.
                              _________________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT
                           FOR THE DISTRICT OF PUERTO RICO

                    [Hon. Raymond L. Acosta, U.S. District Judge].
                                             ___________________
                              __________________________

                                        Before

                            Selya and Cyr, Circuit Judges,
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                             and Fuste,* District Judge.
                                         ______________
                              _________________________

               Gary L. Bostwick, with  whom R. Lance Belsome was  on brief,
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          for appellants.
               Ralph W. Dau  and Andrew K. Epting, Jr.,  with whom Peter B.
               ____________      _____________________             ________
          Ackerman,  Jeffrey  W.  Kilduff,   O'Melveny  &  Myers,  Raul  E.
          ________   ____________________    ___________________   ________
          Gonzalez-Diaz,  A.J. Bennazar-Zequeira,  Gonzalez &  Bennazar, G.
          _____________   ______________________   ____________________  __
          Trenholm Walker, Wise & Cole, Homer L. Marlow, William G. Liston,
          _______________  ___________  _______________  _________________
          Marlow, Shofi,  Connelly, Velerius, Abrams, Lowe & Adler, Paul K.
          ________________________________________________________  _______
          Connolly, Jr., Damian R. LaPlaca,  LeBoeuf, Lamb, Leiby & MacRae,
          _____________  _________________   _____________________________
          Deborah A. Pitts, Hancock, Rothert & Bunshoft, Lon Harris, Harris
          ________________  ___________________________  __________  ______
          &  Green, Bethany  K.  Culp, Patrick  McCoy, Oppenheimer  Wolff &
          ________  _________________  ______________  ____________________
          Donnelly,  Stuart W. Axe, Lester, Schwab, Katz & Dwyer, Francisco
          ________   _____________  ____________________________  _________
          J.  Colon-Pagan, Adrian  Mercado,  Mercado &  Soto, Marcos  Perez
          _______________  _______________   _______________  _____________
          Cruz,  Virgilio  Mendez   Cuesta,  Ernesto  Rodriguez-Suris,  and
          ____   _________________________   ________________________
          Latimer, Biaggi, Rachid, Rodriguez-Suris & Godreau were on brief,
          __________________________________________________
          for appellees.

                              _________________________

                                    March 29, 1993
                              _________________________
          __________
          *Of the District of Puerto Rico, sitting by designation.

SELYA Circuit Judge.  We approach once more the lair of
                    SELYA Circuit Judge.
                          _____________

          the fabled "litigatory  monster," In re Recticel  Foam Corp., 859
                                            __________________________

          F.2d 1000, 1001 (1st Cir. 1988), spawned by the deadly fire which

          engulfed  the San Juan Dupont  Plaza Hotel on  December 31, 1986.

          In  this appeal, three  entities interested in  the ownership and

          operation of  the hotel  contest the  district  court's entry  of

          summary judgment in favor  of a group of seventeen  insurers (the

          pre-fire  insurers) whose  comprehensive general  liability (CGL)

          and  excess  insurance  policies  had  expired  before  the  fire

          occurred.1  Finding no error of law, we affirm.

                    We  recently traced the  six-year procedural history of

          this gargantuan  litigation, see  In Re Nineteen  Appeals Arising
                                       ___  _______________________________

          Out of the San Juan Dupont Plaza Hotel Fire Litig., 982 F.2d 603,
          __________________________________________________

          605-08 (1st Cir. 1992), and it would be pleonastic to repeat that

          exercise.  We remind the reader, however, that the district court

          segmented  the liability inquiry into  three phases.   See id. at
                                                                 ___ ___

          606.   This appeal concerns the third, and final, phase   a phase

          designed to  "determin[e]  the contractual  liability of  various

          insurers."  Id. at 606 n.3.
                      ___

                    The   district  court  wrote  a  lengthy  opinion  that

          describes  the  mechanics of  Phase III  and  we refer  those who

          thirst  for greater detail to that rescript.   See In Re San Juan
                                                         ___ ______________

          Dupont  Plaza Hotel Fire Litig., 802 F. Supp. 624, 629-30 (D.P.R.
          _______________________________

          1992); see also id. at 652-57 (chronicling partial history of the
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               1The opinion below provides a complete list of  the insurers
          in question.   See In Re San Juan Dupont Plaza Hotel Fire Litig.,
                         ___ _____________________________________________
          802 F. Supp. 624, 628 n.3 (D.P.R. 1992).

                                          2

insurance-related litigation).  To  put this appeal into workable

          perspective,  it suffices  to relate  that, during  Phase III,  a

          covey  of cross-claimants,  comprising  forty-eight entities  who

          allegedly owned, operated, or managed the hotel, sought to recoup

          from the  pre-fire insurers some $78,000,000  which the entities,

          collectively, had contributed to  settlement of victims' claims. 

          Finding an absence  of coverage,  the district  court denied  the

          cross-claimants' requests for indemnification.  See id. at 651.
                                                          ___ ___

                    At this  juncture, forty-five cross-claimants  threw in

          the  towel.   The remaining  three, Holders  Capital Corporation,

          Hotel  Systems International, and  Dupont Plaza  Associates, were

          arguably  made of  sterner  stuff.   They  appealed, hawking  the

          theorem  that   defects  in   the  hotel,  apparent   before  the

          ustulation, gave rise to the liability upon which the settlements

          were based; and that, therefore, these payments reflect "property

          damage"  of a kind covered  under the insuring  agreements of the

          policies underwritten by the pre-fire insurers.2

                    We believe that appellants' theorem is  utterly without

          merit.  To say that damages  for bodily injury and wrongful death

          are  really  "property  damage"  within the  ambit  of  carefully

          written  insurance  policies, and  then  to  argue that  coverage

          attaches  not when  the harm-producing  incident occurs  but when
                              
          ____________________

               2Appellants  chose to  limit their  appeal to  the "property
          damage" theory, eschewing  further pursuit  of other  contentions
          they  originally  espoused in  the  district  court.   Hence,  we
          confine  our  comments to  the single  issue advanced  on appeal,
          mindful  that "theories neither briefed nor  argued on appeal are
          deemed  to have been waived."   United States  v. Slade, 980 F.2d
                                          _____________     _____
          27, 30 n.3 (1st Cir. 1992).

                                          3

alleged product  defects first become visible, is  to construct a

          pyramidal proposition  more reminiscent of Lewis  Carroll than of

          the  lexicon  of  insurance law.3    We  cannot  subscribe to  so

          fanciful  a  reading of  either  the appellees'  policies  or the

          applicable  precedents.    And,  moreover, because  we  find  the

          district court's  opinion on this  point to be  well-reasoned and

          clearly articulated, see id. at 643-48, we will be brief.  Where,
                               ___ ___

          as here, a trial court has  produced a first-rate work product, a

          reviewing tribunal should hesitate  to wax longiloquent simply to

          hear its own  words resonate.  We  therefore affirm the  entry of

          summary judgment in this  case substantially on the basis  of the

          opinion  below,  embellishing  our  affirmance  with  a decurtate

          explanation of why  two recently decided cases, not considered by

          the district court, fail to tip the scales in appellants' favor.

                    Relying heavily  on Eljer Mfg., Inc.  v. Liberty Mutual
                                        ________________     ______________

          Ins. Co., 972 F.2d 805 (7th Cir. 1992), appellants argue that the
          ________

          district  court applied an incorrect rule of law.  Eljer involved
                                                             _____

          defective  plumbing  systems that  had  been  installed in  homes

          throughout the  United States.  Citing  policy language identical

          to that  contained in several of the  CGL policies here at issue,

____________________

               3One is reminded of Alice who, upon tumbling into the rabbit
          hole and finding  the garden  door locked, decided  to solve  her
          dilemma by  eating a piece of  cake.  "`Well, I'll  eat it,' said
          Alice, `and if it makes me grow larger,  I can reach the key; and
          if  it makes  me grow  smaller, I  can creep  under the  door; so
          either  way I'll  get into  the garden,  and I  don't care  which
          happens!'"   Lewis Carroll, Alice's Adventures  In Wonderland 8-9
                                      _________________________________
          (Delacorte Press ed.  1966).  Alice  enjoyed her snack    but she
          remained  the same size  and the garden  door remained inviolate.
          See id. at 9.
          ___ ___

                                          4

the  manufacturer of the systems sought a declaration that it was

          covered  for  damages  flowing  from leaks  occurring  after  its

          policies  had lapsed.   A  divided panel  of the  Seventh Circuit

          upheld  the insured's  right to  coverage on  the basis  that the

          "physical injury" took place when the systems  were implanted not

          when  the leakage occurred and the latent harm materialized.  Id.
                                                                        ___

          at 814.

                    We  refuse to  accord  Eljer controlling  weight for  a
                                           _____

          myriad of  reasons.  In the first  place, the Eljer court decided
                                                        _____

          the coverage issue  under Illinois law, see  id. at 806,  in part
                                                  ___  ___

          through the use  of what it  termed "first  principles."  Id.  at
                                                                    ___

          812.  To the extent that Eljer is good law  in Illinois, a matter
                                   _____

          about which Judge  Cudahy disagreed, see  id. at 814-17  (Cudahy,
                                               ___  ___

          J., dissenting),  and  upon which  we do  not opine,  we have  no

          occasion  to transplant  its holding  to a  case, like  this one,

          which is governed  by state  law requiring  a different  result.4

          See, e.g., Albany  Ins. Co. v. Compania de  Desarrollo Comercial,
          ___  ____  ________________    _________________________________

          90 JTS  19 (P.R. 1990); Maples  v. Aetna Casualty &  Sur. Co., 83
                                  ______     __________________________

          Cal. App. 3d 641, 148 Cal. Rptr. 80 (1978).

                    In the second place, insofar as Eljer purports to claim
                                                    _____

          nationwide  application,  we   decline  the  invitation,  whether

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               4The district court saw no  need to make a choice of  law as
          to  whether  the pre-fire  insurers'  policies  were governed  by
          Puerto Rico or California law.   See In re Hotel Fire Litig., 802
                                           ___ _______________________
          F. Supp. at 637 n.31.  Because Puerto Rico law and California law
          coincide on the issue  presented in this appeal, we,  too, abjure
          such a choice.  See Fashion House, Inc. v. K Mart Corp., 892 F.2d
                          ___ ___________________    ____________
          1076, 1092 (1st  Cir. 1989)  (recognizing that a  court need  not
          make a formal choice of law when nothing would turn on it).

                                          5

proffered by appellants or  by the Eljer majority, to  supplant a
                                             _____

          state's body of  contract law with "federal  general common law."

          Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).
          _____________    ________

                    In  the third  place, Eljer's  rule of  law  evolved in
                                          _____

          connection with, and was applied to, a markedly different factual

          situation.   The  inherently defective  plumbing system  at issue

          there was installed in hundreds of thousands of homes nationwide.

          See Eljer, 972 F.2d at 807.  It bore the risk of leaking,  with a
          ___ _____

          failure  rate   "sufficiently  high   to  mark  the   product  as

          defective," from the  moment of installation,  even when used  as

          intended.   Id. at 812.   By contrast, the products  found in the
                      ___

          Dupont  Plaza   Hotel,  although  alleged  to   have  created  an

          unreasonable   danger  in  this  particular  instance,  were  not

          generally defective.  They functioned  properly, with no risk  of
          _________

          failure,  upon normal  use  and became  dangerous  only upon  the

          outbreak of the conflagration.

                    Fourth, and finally, the  property damage caused by the

          defective plumbing systems was just that   property damage, e.g.,
                                                                      ____

          claims for  water damage  to  the victims'  homes, diminution  in

          property values,  loss of  use, costs  of replacing  the systems,

          etc.   See  id. at  807.   Here,  however, unlike  in Eljer,  the
                 ___  ___                                       _____

          insureds' expenditures  were made  to recompense  personal injury

          and  wrongful death  claims rather  than property  damage claims.

          While it is true,  in a metaphysical sense, that  any expenditure

          of  funds from  a  party's estate  can  always be  visualized  as

          property  damage,  the term  "property  damage"  as  used in  the

6

appellees'  policies  is  a term  of  art.5   We  agree  with the

          district court that the  term is not ambiguous and,  fairly read,

          triggers coverage only when damage to property occurs  during the
                                             __ ________

          applicable  policy period.  See  In Re Hotel  Fire Litig., 802 F.
                                      ___  ________________________

          Supp. at 645-46.

                    Appellants also cite  Chemstar, Inc. v.  Liberty Mutual
                                          ______________     ______________

          Ins.  Co., 797  F. Supp. 1541  (C.D. Cal.  1992), as  a basis for
          _________

          urging that the dismissal of their coverage claims was premature.

          In  particular,  they  brandish Chemstar's  acknowledgement  that
                                          ________

          California   courts  have   adopted  more   than  one   rule  for

          ascertaining the date upon which property damage occurs.  See id.
                                                                    ___ ___

          at  1549.    Arguing  that  the  district  court  "did  not  have

          undisputed  material  facts allowing  it  to  decide between  the

          various trigger rules and to determine the  proper application of

          the one that it chose," appellants maintain that summary judgment

          was inappropriate.

                    Even assuming that California  law supplies the rule of

          decision,  see  supra  note   4,  we  disagree  with  appellants'
                     ___  _____

          characterization  of the  sufficiency  of the  factual exposition

          before  the district  court.   Chemstar  makes  clear that  under
                                         ________

          California law  "insurance policies  are triggered when  property

          damage actually occurs,  rather than when some prior wrongful act

          is committed."  Id. at 1548.  Indeed, the Chemstar court embarked
                          ___                       ________

____________________

               5This  term is precisely defined in most of the policies and
          is satisfactorily defined by the structure of the one policy that
          does  not contain an explicit  definition.  See  In re Hotel Fire
                                                      ___  ________________
          Litig., 802 F. Supp. at 645-46.
          ______

                                          7

upon a  discussion of  various  trigger rules  merely because  it

          observed that,  in latent defect  cases, the "date  when property

          damage occurs is often difficult to pinpoint."  Id.
                                                          ___

                    In  the case at bar,  no such difficulty  existed.  The

          record makes manifest that none of the hotel's property contained

          the type  of latent defect  that would have  set the stage  for a

          complex determination of  the date damage  occurred.  Bearing  in

          mind the  illogic  of  the  proposition  that  products  fit  for

          ordinary use can  be deemed defective  at all, we  are unable  to

          conceive of any evidentiary proffer that could alter the  obvious

          trigger  date    and  appellants have  not  suggested, let  alone

          documented,  a viable scenario for such an alteration.  Here, the

          damage  indisputably occurred on the date of the fire, well after

          the  expiration of  the  insurance policies  underwritten by  the

          appellees.    Hence,  coverage  was  triggered  at  a  time  when

          appellees were no longer on the risk.

                    We  need go no further.  The supposed defects that were

          apparent  in the  Dupont Plaza  Hotel before  the fire  and which

          allegedly contributed to  the victims' injuries  were not at  all

          representative of the specie of "property damage" contemplated in

          the pre-fire insurers' policies.  Because this is so, and because

          no  insured  loss took  place  during the  policy  period(s), the

          district  court did not  err in  granting the  pre-fire insurers'

          motion for brevis disposition.
                     ______

Affirmed.
          Affirmed.
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8